What Comes After Legalization? 2 Cannabis Entrepreneurs Weigh In

© TheStreet What Comes After Legalization? 2 Cannabis Entrepreneurs Weigh In

After New York legalized recreational cannabis use at the start of this month, news of what this would mean for business and investors reached a fever pitch.

Sara Gullickson, the founder and CEO of The Cannabis Business Advisors, a company providing licensing and growth guidance to 10 clients across the country, has been in the industry since 2010, when medical cannabis was just starting to be recognized and recreational marijuana was illegal everywhere in the country.

After launching Dispensary Permits, her first consulting firm, at age 27 and starting several ancillary companies in the space, Gullickson sold Dispensary Permits and its portfolio of brands to a publicly-traded company in 2018. Today, Gullickson and CB Advisors President Maxime Kot help companies across the country navigate business opportunities both in cannabis and its derivatives alongside a complex system of licensing and regulation requirements.

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We sat down to interview Gullickson and Kot about the opportunities that present themselves in a state that has recently legalized cannabis as well as what it takes to get a company primed to grow and potentially be traded publicly. The interview has been edited for length and clarity.

Is it harder or easier to secure a cannabis license and start a company now compared to a decade ago?

Gullickson: It was more taboo back then but probably also a little bit easier. As a rule of thumb, about five to seven people would apply for every one license that was secured. Today, that number is well over 20. The stakes are higher now that more people have gotten into the industry.

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Kot: You now have more access to funding and other industry professionals that are taking this industry seriously. In that respect, it is easier but there is also more competition. Because you are opening up to mainstream businesses, there are larger corporations that also want in on this industry.

This is a heavily-regulated industry with laws that are constantly in flux. How does one run a successful business in such an environment?

Gullickson: You need to have a good legal team that is always keeping an eye on your compliance. [I’m in Arizona right now] and here they’ve rolled out not only a recreational program but also testing regulations. The changes that facilities have had to make in the last eight to 10 months are enormous. They have to factor wait times to get the testing of their products back in, and some of them have had to change their grow protocols to take into account things like pesticides, “natural” classifications and dosing.

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Kot: In New York specifically, there are only 10 licenses and each licensee is allowed to open up one dispensary. If you do the math, that is not very many producers for one of the most populated states in the US. The state is being very cautious about preventing monopolies. The legislation and the bill are quite strict about that.

I expect them to release quite a few more licenses and come up with very strict regulations to prevent a monopoly-type takeover from the bigger companies. That would give a lot of opportunities to companies that are local, especially social equity applicants, which includes people who have been harmed by cannabis criminalization, as well as women or minority-owned businesses. [New York is] promising that 50% of these licenses will have to go to social equity applicants.

What are the biggest business and investment opportunities in the cannabis space in 2021?

Gullickson: For the states that are coming up [in conversation as potential opportunity hot spots] right now, we’re looking at New York, New Mexico, New Jersey, Georgia, and potentially Illinois. Those are kind of what our focus is on right now so that we’re ready to prop up people, put up marketing opportunities and start accepting leads. But when you talk about opportunities, I think people have a hard time wrapping their brains around the fact that there’s more entry points to the industry than just a license.

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Kot: A lot of people like the sexy part of marijuana and want to be on the plant-touching side of things. We always advise people who want to break into this industry to think about what they’re really good at. Are you good at marketing? Numbers? Taxes? There is a big need for ancillary services. It is a new industry and, as it evolves, there’s always going to be a problem that needs to be solved. There are still issues with IP and technology as well as inventory tracking that hasn’t been perfected yet across the board.

Cannabis stocks peaked in February and have been lagging somewhat despite New York’s news. Do you think the market was getting ahead itself? How can you tell what will be a good investment?

Gullickson: I think people see the word cannabis and go ‘I’ll just throw a bit of cash at this — if it works, great. If it doesn’t, that’s totally fine.’ But if you get enough of that mentality, it drives the numbers up even though some of the companies may not be real or functioning properly. You have to do your due diligence and really understand who the operators are, making sure that they’re good people and have clean backgrounds.

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What advice would you give to someone who is looking to invest in cannabis for the first time?

Gullickson: It is always going to be up to the person and what they want to do. What’s their risk profile? Do they want to work or do they want to have a silent investment in the company? If that’s the case, when does the right deal come your way? The entry point for us is really natural since we do licensing but that’s not the only entry point or the only company that needs financing, with ancillary businesses and things like that.

I don’t think that the opportunity is going to go away. History repeats itself and we’ve been a functioning industry for over a decade now, if not two, in California. It’s good to be actively looking for things but it’s not like you have to throw cash at it today or you’ll never get to do it again.

This article was originally published by TheStreet.